Getting turned down for credit can be disheartening especially if you don’t understand why. There are a number of reasons that a lender or provider may refuse to grant you credit, but there are also a few steps you can take to try and prevent it from happening again.
You don’t meet the lender’s criteria
One of the most common reasons for being turned down by a lender is that you don’t fit their acceptance criteria. Some lenders will be stricter with who they accept and will only want applicants who are fairly low risk. This could be those with excellent or good credit history, who live in a certain area of the country, have a bank or building society account, have their own home or have another product with the lender, such as a bank account or credit card. These lenders often have a lower representative APR and so can seem attractive to applicants, but if you’re in any doubt about being accepted then steer clear as you could end up harming your chances of finding credit elsewhere.
You’re new to credit
You may think that if you’ve had no credit in the past, then you’ll be an ideal candidate as your credit history is spotless - this is not the case. No credit history is almost as bad as poor credit. Lenders don’t know how reliable you will be when making monthly repayments so may reject you because you haven’t built up a proven record of managing credit. If you fall into this category then there are lenders and credit card providers who can offer specialist products that are specifically for building credit. Once you’ve shown that you can make repayments and are creditworthy, you can then look at applying for further credit if you need it.
Blemishes on your credit file
Having bad credit can be down to a number of factors such as missed or late payments, CCJs, too much debt and even declaring bankruptcy. Your credit report dates back over the past six years and shows how each of your credit accounts have been handled, so, even if you have been reliable for the last couple of years, a default from your past could come back to haunt you. Of course, different lenders will accept applicants with various credit histories and if they are more lenient, your credit history may not even be a consideration. When considering finance, first step is to check your credit score and have a thorough look at your history. Does it match up with what your chosen lender is looking for? If not, you might need to do some more research to find a suitable lender. You will also need to make sure that the information on your credit file is correct as any inaccuracies can also harm your chances of being accepted.
You’ve applied too many times
Although it may seem like a catch 22, making too many applications to lenders and being declined will only reduce your chances of acceptance. Each time you apply, a lender will do a credit check to see if you’re creditworthy - this leaves a footprint on your credit file. It won’t say whether you were accepted or declined, but multiple applications to multiple lenders in a short space of time will make you appear desperate, and lenders may start to question why, and whether you are too risky to lend to. To avoid applying too many times, put the groundwork in at the research stage. Check the criteria, check your credit score and find the best loan lender or credit card provider for your circumstances so that you only apply once.